| Are penny stocks legitimate? | | | | to buy property for expansion. The price remains in |
| How can these small cap sized stocks make large | | | | the $1 to $2 range... until they discover gold. This |
| gains in a short period of time while bigger companies | | | | pocket of gold looks very attractive and their share |
| with more established track records are hardly | | | | shoots up to $15 per share... |
| increasing in size? | | | | - A high tech company is working on new technology |
| The reason why penny stocks are making large gains | | | | that could change the face of computing. They've |
| are because someone is losing money. How else can | | | | been working around the clock to launch this new |
| you be gaining money? | | | | product. Their stock is trading at $0.15 per share. As |
| There are many reasons for this. The first reason is | | | | soon as they launch their product, it impresses the |
| the "boat theory". It takes a long time for a big | | | | global market and their stock rises to $20/share. |
| company to make big rackets across the ocean floor | | | | (As a side note this happened to Microsoft: In 1986 |
| and big waves are much harder for them to make. It | | | | their price was about $0.10 per share. But 1990 their |
| takes a big boat to turn around in the ocean. A small | | | | price has risen to $1 per share. In February 2000, |
| company, one that is represented by a penny stock | | | | their share was nearly $50 per share. If you had |
| can make quicker turns faster. They are more nimble | | | | bought only 100,000 shares at just $0.10 per share in |
| and quick. | | | | 1986 for a total of $10,000, and sold it at $40 per |
| A second reason is because penny stocks are usually | | | | share, you would have made over $39,900,900.) |
| of new or lesser known companies. While established | | | | -A Biotech company is developing a new cure that |
| companies already have their technology in place, | | | | will end a formally incurable disease. They need to |
| these stocks are probably just developing their | | | | raise money to fund their tests, an essential part of |
| product or service. People buy these stocks to help | | | | the FDA approval process. After discovering their |
| finance the rapid production of these services. | | | | technique works their share price jumps from $0.45 |
| As soon as the company finishes their product, the | | | | share to $5/share. |
| stock price jumps in value. | | | | These are the reason why companies are trading at |
| The problem is, a lot of these companies do NOT | | | | affordable prices and can make rapid gains in a short |
| finish producing their product. | | | | period of time. These are many success stories |
| Here are some examples of rapid price jumps: | | | | waiting to be discovered. |
| - A mining company raises money so they can afford | | | | |